Question

Jason used his car as collateral to borrow money from his bank. After losing his job, Jason is now unable to make his monthly payments for the loan, defaulting on the loan. If Jason is unable to continue to make his payments, what is likely to happen to his car? a. The bank will ask Jason to sell the car to help pay back his loan. b. The bank will seize the car and likely sell it to pay off Jason’s loan. c. The bank will notify the local government of Jason’s default on his loan, making it illegal for Jason to drive the car. d. The bank will put a “boot” on one wheel of the car, making it un-drivable until Jason begins making his payments again.

Answer 1

Answer:

Option B is the correct choice.

Step-by-step explanation:

As Jason used his car as collateral to borrow money from his bank and now he is unable to pay the loan. The car was a sort of guarantee against the loan. The loan must be of lesser amount than the car's value. Hence, the bank will sell of the car and recover its money. So, option B - The bank will seize the car and likely sell it to pay off Jason’s loan. -is right.

Answer 2

The option (b) is correct.

The bank will seize the car and likely sell it to pay off Jason’s loan.

Further Explanation:

a.

The bank will ask Jason to sell the car to help pay back his loan:

As per the terms of collateral, if a person is not able to pay off its debt, then the collateral which the customers have given to the bank will help the bank to recover its loan amount, and the person can do nothing about it because the customer duly signs the agreement. Therefore, the option is incorrect.

b.

The bank will seize the car and likely to sell it to pay off Jason’s Loan:

It is true that until the customer does not pay off its loan against which collateral security has been put, the bank is allowed to seize the asset and sell it off to recover the amount of loan.

c.

The bank will notify the local government of Jason’s default on his loan, making it illegal for Jason to drive the car:

It is incorrect to say that the bank will do so because the bank only has the right to recover its amount of loan and it can do nothing to against Jason. Although, the bank can take legal actions against Jason but asking the local government not to let Jason drive a car ever is not possible.

d.

The bank will put a “boot” on one wheel of the car, making it un-drivable until Jason begins making payments again:

The bank can do so, but it will not help it to recover the amount of loan. Also, Jason can take off the boot from the car and reuse it. Therefore, the option is incorrect.

Learn more:

1. Learn more about the lifetime cost of the loan along with interest

brainly.com/question/1757741  

2.      Learn more about the interest on credit card

brainly.com/question/5993991

3.      Learn more about compound interest

brainly.com/question/1033449

Answer details:

Grade: Senior School

Subject: Business Studies

Chapter: Loan

Keywords: Collateral, bank loan, unpaid loans, Jason losing job, unable to make payment for the loans, default on loan, making payments for the loan, selling a car for it.